RETIREMENT AGREEMENT

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                                                                   Exhibit 10.60

                              RETIREMENT AGREEMENT

     This Agreement is executed on the dates set forth below by and between
RICHARD W. BAUER ("Bauer"), residing at 1357 Tamarack Road, Manasquan, New
Jersey 08736, and OSTEOTECH, INC. ("Osteotech"), located at 51 James Way,
Eatontown, New Jersey 07724.

                                   WITNESSETH:

     In consideration of the mutual covenants and obligations hereinafter set
forth, Bauer and Osteotech agree as follows:

     1. Bauer and Osteotech confirm that Bauer shall retire from his employment
at Osteotech upon the close of business on December 31, 2005 (the "Retirement
Date").

     2. If Bauer retires in accordance with Section 1 hereof, Bauer shall
receive a payment of thirty-four thousand nine hundred sixteen dollars and
sixty-seven cents ($34,916.67), an amount which is equal to his gross base
salary for one month, on each of January 15, 2006, February 15, 2006 and March
15, 2006 for a total of one hundred four thousand seven hundred fifty dollars
($104,750.00) and on July 1, 2006 Bauer shall receive a payment of one hundred
four thousand seven hundred fifty dollars ($104,750.00), which is equal to three
months of his gross base salary. Commencing on and including July 15, 2006,
Bauer shall receive payments equal to 18 months of his gross base salary in the
total sum of six hundred twenty eight thousand five hundred dollars
($628,500.00). Such payments shall be made by check in thirty-six (36)
semimonthly installments, between July 15, 2006 and December 31, 2007, each in
the gross amount of seventeen thousand four hundred fifty-eight dollars and
thirty-three cents

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($17,458.33). In addition, on December 30, 2005, Osteotech shall pay to Bauer a
transition payment in the amount of forty-six thousand six hundred eighty-five
dollars and thirty-four cents ($46,685.34) for the purpose of establishing an
office, arranging logistical support and arranging Bauer's affairs so as to be
in a position to assist the Company in the duties envisioned by this Agreement
and to permit Bauer to transition from full time employment to such duties. On
December 30, 2005, Bauer shall receive compensation corresponding to all unused
vacation pay that Bauer will have accrued as of December 30, 2005. All payments
made to Bauer pursuant to this Agreement shall be subject to applicable
deductions in accordance with Osteotech's standard payroll practice.

     3. Consistent with past practice, including the payment of a portion of the
premiums by Bauer, following Bauer's retirement, in accordance with Section 1
hereof, Bauer's participation in Osteotech's medical, dental and life insurance
plans, and Osteotech's payment of premiums for Bauer's medical, dental, and life
insurance coverage (including coverage of his family), shall continue through
the later of (i) December 31, 2007 and (ii) the date Bauer ceases serving on
Osteotech's Board of Directors (the date in (i) or (ii) above being the
"Insurance Termination Date"). Commencing on the Insurance Termination Date,
Osteotech shall pay all COBRA premiums on behalf of Bauer, through the earlier
of (i) such time that Bauer becomes eligible to receive Medicare benefits, or
(ii) eighteen months after the Insurance Termination Date. The premium payments
for such coverage through the Insurance Termination Date and the COBRA premium
payments represent employer provided coverage under a health plan, and, in
accordance with Internal Revenue Code Section


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106, will not be taxable income to Bauer. Accordingly, Bauer shall not receive a
form 1099 on account of such payment of premiums by Osteotech. Osteotech shall
provide Bauer with the opportunity to make an application for portability or
conversion of any life insurance policy on his life as of December 31, 2007. For
so long as Bauer serves on Osteotech's Board of Directors prior to December 31,
2007, he will not be eligible to receive cash Board fees, but will be eligible
to receive options and stock paid to the members of the Board upon their
re-election to the Board by the stockholders in each year that Bauer is
re-elected to the Board. For so long as Bauer serves on Osteotech's Board of
Directors after December 31, 2007, Bauer will be eligible to receive Board fees
in the same form, whether cash, options or stock, as other non-employee Board
members.

     4. Bauer agrees that no additional compensation of any kind shall be paid
to him, and the benefits provided to him under this Agreement shall be in full
payment and satisfaction of any and all financial obligations due to him from
Osteotech. Bauer shall be entitled to receive 100% of the bonus payments, if
any, that are awarded to Bauer for the year ending December 31, 2005 in
accordance with the Management Performance Bonus Plan, regardless of when such
bonus is awarded. Such bonus payments shall be paid to Bauer in accordance with
the Management Performance Bonus Plan and past practice.

     5. A copy of Bauer's Osteotech, Inc. Stock Option Detail Report, as of
October 31, 2005, is attached hereto as Exhibit A.

     6. All inquiries received by Osteotech concerning Bauer from potential or
future employers or other business associations shall be directed to Mr. Jeffrey
M. Rosen, Vice President of Human Resources of Osteotech, or his successor, for
response. Should


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any potential or future employer or other business associations contact
Osteotech for a reference concerning Bauer, Osteotech shall verify only Bauer's
job title, dates of employment and the reason for termination being his
voluntary retirement.

     7. (a) In exchange for Osteotech's agreement to provide Bauer the benefits
provided by this Agreement, Bauer, for himself, his heirs, administrators,
executors, representatives and/or assigns, hereby voluntarily discharges and
releases Osteotech and its affiliates, parent and subsidiary companies,
officers, directors, employees, agents, representatives, successors and assigns
(collectively the "Osteotech Releasees") from any and all claims or liabilities
of any kind or description, known or unknown, suspected or unsuspected, fixed or
contingent, which Bauer ever had, now has or hereafter may have against each or
any of the Osteotech Releasees by reason of any matter whatsoever arising out of
or resulting from Bauer's employment at Osteotech through the date of this
Agreement, his agreement to retire from his employment at Osteotech and his
retirement from such employment. This release of claims specifically includes,
but is not limited to, any claim of discrimination, including any claim arising
under, or based upon, the Age Discrimination in Employment Act (or the Older
Workers Benefit Protection Act), Title VII of the Civil Rights Act of 1964, as
amended, the Americans with Disabilities Act, the New Jersey Conscientious
Employee Protection Act and/or the New Jersey Law Against Discrimination, and
any and all contract, quasi-contract, estoppel, tort or statutory claims under
federal, state or local law arising out of or resulting from Bauer's employment
at Osteotech and/or his retirement from such employment.


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     (b) Bauer agrees to execute and deliver to Osteotech, on the Retirement
Date, a further General Release in the form of Exhibit B to this Agreement. The
benefits set forth in this Agreement shall not be paid to Bauer pursuant to the
terms of this Agreement until seven (7) days have passed after he signs such
General Release, and in the absence of revocation by him of such General
Release.

     (c) In exchange for the benefits provided to Osteotech by this Agreement,
Osteotech, for itself, its officers, directors, successors, agents,
representatives and assigns, hereby voluntarily discharges and releases Bauer
and his heirs, administrators, executors, representatives and/or assigns
(collectively the "Bauer Releasees"), from any and all claims or liabilities of
any kind or description, known or unknown, suspected or unsuspected, fixed or
contingent, which Osteotech ever had, now has or hereafter may have against each
or any of the Bauer Releasees by reason of any matter whatsoever arising out of
or resulting from Bauer's employment at Osteotech through the date of this
Agreement, and his retirement from such employment.

     (d) Osteotech agrees to execute and deliver to Bauer, on the Retirement
Date, a further General Release in the form of Exhibit C to this Agreement.

     (e) The terms and conditions of this Agreement shall be binding on the
parties hereto as of the date the Agreement has been signed and delivered by
both parties and this Agreement may not be unilaterally terminated, revoked or
amended by either party except as provided herein. Notwithstanding the
foregoing, except for the agreement set forth in Section 1 hereof, the portions
of Section 4 regarding the bonus payout, and the releases set forth in Sections
7(a) and 7(c) hereof, the provisions of this Agreement


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shall not be effective unless and until Bauer retires on the Retirement Date in
accordance with Section 1. Until such provisions of this Agreement become
effective immediately after the Retirement Date, the terms of the Employment
Agreement by and between Osteotech and Bauer effective as of December 4, 1998,
as amended (the "Employment Agreement"), which Employment Agreement has been
renewed automatically for every two years for an additional two year term, shall
remain in effect and shall govern the terms of Bauer's employment with Osteotech
and the termination of Bauer's employment with Osteotech prior to the
effectiveness of such provisions of this Agreement. Upon the effectiveness of
such provisions of this Agreement immediately after the Retirement Date, the
Employment Agreement shall terminate and be of no further force and effect. None
of the releases contained in Section 7(a) and 7(c) of this Agreement or Exhibits
B and C hereto shall be deemed to be a release of any of the obligations of
Osteotech or Bauer under the Employment Agreement or this Agreement.

     (f) Notwithstanding anything to the contrary contained herein, if Osteotech
signs a preliminary or definitive agreement agreeing to, or Osteotech's board of
directors authorizes Osteotech's management to pursue, a transaction or series
of transactions that would constitute a "Change in Control" (a "Change in
Control Transaction") under the Change in Control Agreement dated as of
September 8, 2002, as may be amended to comply with IRC Section 409A or other
applicable law and regulations, by and between Osteotech and Bauer (the "Change
in Control Agreement"), or if a public announcement is made by a third party
that it is pursuing a transaction which if consummated would constitute a Change
in Control Transaction, and such


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Change in Control Transaction shall be consummated on or before the Retirement
Date, this Agreement shall not become effective (except for the releases set
forth in Sections 7(a) and (c) hereof), the Change of Control Agreement shall
remain in full force and effect and shall govern the terms and conditions of
Bauer's employment with Osteotech and the termination of Bauer's employment with
Osteotech, and Sections 12, 13 and 14 of the Employment Agreement shall remain
in full force and effect.

     (g) Notwithstanding anything to the contrary contained herein, if Osteotech
signs a preliminary or definitive agreement agreeing to, or Osteotech's board of
directors authorizes Osteotech's management to pursue, a transaction or series
of transactions that would constitute a Change in Control Transaction on or
before the Retirement Date, or if a public announcement is made by a third party
that it is pursuing a transaction which if consummated would constitute a Change
in Control Transaction on or before the Retirement Date, and such Change in
Control Transaction shall be consummated subsequent to the Retirement Date, the
Change in Control Agreement shall terminate and this Agreement shall become
effective in accordance with its terms, except that Bauer shall receive the
payments due to him under Section 2 of this Agreement until such time as such
Change in Control Transaction is consummated, at which time (i) the payments
under Section 2 of this Agreement and the benefits under Section 3 of this
Agreement shall cease, (ii) in the place of the payments and benefits referred
to in subsection 7(g)(i) above, Bauer shall be entitled to receive the benefits
provided by Section 4(b)(ii) of the Change in Control Agreement and the payments
provided by Section 4(b)(iii) and Section 4(d) of the Change in Control
Agreement, provided that any


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such payments payable to Bauer under Section 4(b)(iii) of the Change in Control
Agreement will be reduced by the amount of payments received by Bauer under
Section 2 of this Agreement, (iii) th